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Top 7 Ways To Manage A Delinquent Mortgage

Posted On Monday, 15 November 2021 19:38
Top 7 Ways To Manage A Delinquent Mortgage

The COVID-19 pandemic has led to increasing levels of unemployment and loss of income for many. Based on data from ATTOM, 10,289 properties began the foreclosure process in September 2021. This represents a 106% rise from the previous year.

According to the Department of the Treasury, a mortgage is delinquent if it is over 30 days late. As many homeowners struggle to meet their mortgage payments, this article will explain some of the ways to manage a delinquent mortgage.

1. Forbearance Request

In most cases, lenders would prefer to help borrowers begin repaying their delinquent mortgages instead of foreclosing on their homes. This is especially true if your situation is temporary. The US Treasury has released guidelines for those impacted by the COVID-19 pandemic, which means they may reduce payments or suspend them for a period of time.

In 2009, the Home Affordable Modification Program (HAMP) was introduced to avoid foreclosure by helping homeowners reduce their mortgage payments to 31% of their gross income if certain requirements are met. This loan modification program can also suspend payments completely for one year or more until you are able to resume your payments. Once the forbearance period is over, lenders will work together with homeowners to potentially modify their loans and lower monthly repayments if necessary.

2 Refinancing To A Longer Loan Term

Paying your loan over a longer period may be an available option that lowers your monthly mortgage repayments. The 2009 Home Affordable Refinance Program (HARP) was set up to help homeowners whose homes are worth less than their outstanding balance on their loans, which are refinanced at more favorable mortgage rates. Refinancing of mortgage loans under the HARP is available only to loans taken out before May 21, 2009.

3. Loan Modification

If the option to refinance is not available, the possibility of renegotiating the terms of your mortgage through loan modification may be available. Under this option, the lender and homeowner reach an agreement to change one or more of the original terms of the mortgage, such as extending the duration of the loan, lowering the interest rate, or changing it from an adjustable to a fixed-rate loan. Once modified, the terms of your loan will be more favorable and your monthly payments will be lowered to a more affordable amount.

Generally, loan modification is offered when a homeowner’s ability to make payments has changed but they can demonstrate their ability to make payments after the loan is modified. Lenders may also require borrowers to undertake a trial period of three months before loan modification becomes permanent.

4. Preforeclosure

Also known as a short sale, a preforeclosure sale is often a final resort for homeowners who cannot meet any of the lender’s other options for delinquent mortgages. Preforeclosure occurs when there is negative equity in the house because the loan amount exceeds the property’s market value. Here, the lender can agree to settle the mortgage debt for less than what is owed by selling the property for a minimum price and the borrower moving out of their home. If you are considering selling your house fast, Ocean City Development may be able to assist.

5. Deed In Lieu

Rather than going forward with foreclosure proceedings, this involves the homeowner moving out of the property and transferring ownership of the house to the lender.

6. Repayment Plan

This option gives homeowners the ability to make overdue payments once they are in a position to do so. Repayment plans allow the possibility of making monthly mortgage payments with an additional amount until any arrears are paid. This can be done either in installments or as a lump sum payment.

For this option to be available, the lender will need to be satisfied that the homeowner is in a financial position to afford larger monthly payments.

7. Lower Associated Costs

One option that does not seek to change your mortgage payments is to look at lowering other associated costs of owning a house. One example is shopping around for more competitive property insurance or exploring the possibility of a reduction of or exemption from property taxes, also known as an abatement. All of these routes could lead to lower overall monthly costs.

If homeowners have sufficient equity in their homes, they may also have the option to stop paying private mortgage insurance (PMI). Borrowers can request to end these monthly payments once their loan-to-value (LTV) ratio falls below 80%. In many cases, homeowners continue making this payment long after they need to, so it is worth inquiring whether this is an additional expense that can be eliminated.

Conclusion

Before exploring any of the options above, it is best to consider seeking mortgage advice for further information on your best option.

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